PartyGaming revenues rise on casino growth

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Partygaming, the world’s largest internet gambling company by revenue, beat analysts’ expectations with a first quarter revenue increase of 54 per cent, as its casino games continued to grow and the company won record numbers of new poker users.

Revenue for the three months to March 31 was $342.6m (£192.8m) compared with $222.6m for the same period in 2005, the company said in a key performance indicators statement on Tuesday.

Roughly half of the year-on-year growth came from the casino business, which was boosted by the launch of Blackjack in late 2005 and by the integration in February of all casino services under the PartyCasino banner, which improved cross-selling opportunities amongst poker players. Meanwhile “real money” player numbers grew by 263,254 at the more established poker business and the yield per active player was $18.50, similar to a year earlier, despite fears it would decline.

Most analysts raised their forecasts and share price targets, or indicated that they would do so, but the shares continued to show characteristic volatility. After rising by more than 3 per cent in early trade, they fell by as much as 7.4 per cent to 143½p before regaining some ground in the afternoon.

Much of the shares’ movements relate to regulatory concerns in the US, where two bills to restrict online gaming are before the House of Representatives and another attempt was recently made. More than 78 per cent of sales for the first quarter came from the US, despite a growth in the proportion of new customers from outside the US to 39 per cent.

“If you look at the trend over time, you can very clearly see a consistent trend where a higher proportion of sign-ups are coming from outside the US,” said Martin Wiegold, finance director.

The shares shot up in early April after a debate in early April raised some questions for one bill, introduced by Republican senator Bob Goodlatte. However one analyst, who did not want to be named, said attempts to introduce such legislation would not go away and it was still a “tough” issue for the company.

However Andrew Lee, an analyst at DrKW, believes that little has changed on the regulatory front and that there is little chance of a prohibitive bill being successful. “With this in mind it seems a little harsh that the share price is back to January levels after four consecutive upgrades.”

The quarter covered by the “key performance indicators” released by PartyGaming on Tuesday was an eventful one. The company in February settled a legal dispute with a rival, Empire Online, by buying Empire’s marketing operation for $250m. It was also the final quarter under the stewardship of Richard Segal, who quit as chief executive because he did not want to relocate to Gibraltar, where PartyGaming is headquartered. Mitch Garber, who was offered a sign-on fee of $6m, takes Mr Segal’s place from Wednesday.

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